The 500 largest money managers were able to catch their breath in 2009, as their worldwide institutional assets experienced a 19% increase — to $25.5 trillion, Pensions & Investments' annual money manager survey shows.
It was a year of partial recovery from the financial despair of 2008, when assets fell 21%. But assets at year-end 2009 still were well below the $27.5 trillion in worldwide institutional assets managed by the top 500 two years earlier.
Internally managed U.S. institutional tax-exempt assets among the top 500, meanwhile, grew at a more modest 10%, to $9.5 billion.
(The assets of Capital Research & Management Co., which did not provide figures for the year-earlier survey, were deducted from the 2009 data for the comparisons. Also affecting the total was that for 2009, AXA Investment Managers reported assets reflecting its broad asset management units, while in previous years it reported only for its U.S. division.)
Equity markets provided a strong boost to money manager assets, with the Russell 3000 gaining 28.3% and the Morgan Stanley Capital International Europe Australasia Far East index rising 31.8% in 2009.
That was a sharp reversal from 2008, when domestic and international equity indexes plunged between 37% and 43%. (Click here to view all the stories, tables and charts in this year's Largest Money Managers special report.)
But lingering concerns about poor equity performance and volatility in the markets were still haunting institutional investors, who continued their move last year to fixed-income strategies.
In 2009, internally managed active domestic equities for U.S. institutional tax-exempt clients reported by the managers in P&I's survey grew a healthy 24% to $1.6 trillion, but the growth in active domestic fixed income dwarfed that, rising 34.9% to $2.3 trillion. When adjusted for the 28.3% increase in the Russell 3000 stock index and the 5.93% hike in the Barclays Capital Aggregate bond index, the difference is even greater: Active equities dropped 3% while active bonds grew 28%.
Among passive strategies, domestic bonds grew 5.5% to $328.3 billion while domestic equities rose 27% to $1 trillion. International equities had the biggest jump, 36.2%, bringing assets reported at year-end 2009 to $287 billion. (On a market-adjusted basis, the domestic strategies both were relatively flat, while international equity shows a 3% gain.)
“The gains (in indexing) suggest some degree of institutional investor dissatisfaction with active management through the market downturn,” said Inga B. Sweet, a senior vice president and manager of the global manager research group at Callan Associates.
Callan's own data show net outflows in 2009 of nearly $161 billion from active institutional strategies, while index funds added approximately $75 billion.